Saggi, Kamal and Yildiz, Halis Murat (2008): Bilateral trade agreements and the feasibility of multilateral free trade.
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This paper compares stable Nash equilibria of two games of trade liberalization. In the FTA game, each country can form an FTA with either one of its trade partners, or both of them, or none of them. By contrast, in the No FTA game, each country must choose either no agreement or free trade. Under symmetry, free trade is uniquely stable under the No FTA game whereas the FTA game also admits a bilateral FTA as an equilibrium. However, there exist patterns of cost asymmetry for which the freedom to pursue bilateral FTAs is necessary for achieving global free trade.
|Item Type:||MPRA Paper|
|Original Title:||Bilateral trade agreements and the feasibility of multilateral free trade|
|Keywords:||Multilateral Trade Liberalization, Free Trade Agreements, GATT, Intraindustry Trade, Oilgopoly|
|Subjects:||F - International Economics > F1 - Trade > F13 - Trade Policy; International Trade Organizations
F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies
|Depositing User:||Halis Murat Yildiz|
|Date Deposited:||28. Sep 2009 16:31|
|Last Modified:||12. Feb 2013 13:21|
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